After banks, the fingerprints of both borrower and guarantor – verified by the National Identification Card Database –will be required for finalising the loan approval documents of non-bank financial institutions (NBFIs) from now on.
Signatures of both borrower and guarantor will also have to be taken on relevant documents and these documents must be read out to a third party, said a circular issued by Bangladesh Bank’s (BB) Financial Institutions and Market Department (DFIM) on Monday.
Recently, the High Court observed that borrowers and guarantors were not signing relevant documents while seeking loans from banks and NBFIs and several writ petitions have been filed over this issue.
The central bank has taken the latest moves in response to this observation, saying such irregularities are severely disrupting the legal process of loan recovery.
The circular said that the thumb impression issue has been included under the guidelines on Credit Risk Management (CRM) for NBFIs.
According to the guidelines, credit administration should ensure that the credit application has proper approval before entering facility limits into computer systems. Disbursement should be effected only after the execution of charge documents and completion of covenants and upon creating a charge on primary securities and collaterals.
However, in case of exceptions, necessary approval should be taken from the authorities concerned. But, no loan can be disbursed before necessary approvals have been granted. In disbursing loans, the borrower must understand and acknowledge the purpose of the loan.
It is also imperative for the NBFIs to design and implement checks, such as the submission of invoices, to ensure that the proceeds are spent on the designated purpose and for no other purposes, and for the borrower to understand and comply with these checks.